Shopify’s downbeat revenue growth forecast sends shares to six-month low

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Shopify’s downbeat revenue growth forecast: Canadian e-commerce behemoth Shopify expects its slowest quarterly sales growth in two years due to an uncertain economic climate and sluggish customer spending. Shares of the firm, which are listed in Toronto, fell around 20% on Wednesday as a result of this estimate, reaching a six-month low and putting the company on track to lose C$25 billion ($18.21 billion) in market value. Even though Shopify had a fantastic first quarter, its subsequent performance has been overshadowed by its gloomy prognosis.

A combination of cautious consumer behavior and the post-pandemic upsurge in online shopping has resulted in a decrease in discretionary expenditure. Shopify has thus far faced resistance in its attempts to incorporate AI-based capabilities into its products and services and to apply price modifications. In addition, the majority of the company’s clients are SMEs, who are more susceptible to the effects of long-term inflation.

Compared to the prior quarter, the advantage of price increases will be smaller in the current quarter, according to finance head Jeff Hoffmeister. He brought attention to the impending challenges to revenue growth caused by the initial pricing modifications on standard plans that were taken into account in April 2023.

Investors may be disappointed to hear that Shopify expects second-quarter sales growth of around 17%, lower than the 26% average growth rate seen in the previous three quarters. For the current quarter, analysts projected a 19.35% increase in sales using LSEG data.

In contrast to the 4% decrease in operational expenses in the previous three months, Shopify anticipates a low-to mid-single digit percentage rate of increase in the second quarter. The sale of the company’s logistics division to freight forwarder Flexport also had an effect on the first-quarter performance.

Third Bridge analyst Charlie Miner noted that investors are worried about the company’s prospects due to the prediction of a shrinking profit margin and lower-than-expected sales in the second quarter, even though the company performed well in the first quarter.

Financially, Shopify’s first-quarter sales of $1.86 billion was higher than the $1.85 billion average forecasted by experts. Twenty cents per share in adjusted earnings was more than the 17 cents predicted. As a result of pricing changes and a growth in the number of merchants using Shopify’s services, Subscription Solutions revenue skyrocketed to $511 million, a 34% increase over the prior year.

Ethan Sullivan

Ethan's penchant for the pulse of the fashion world extends to covering lifestyle topics, offering readers a seamless blend of the latest style updates and lifestyle trends.

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